Note 1 - Basis of Presentation	9 Months Ended
Sep. 30, 2017
Notes to Financial Statements
Basis of Presentation and Significant Accounting Policies [Text Block]	NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements of Middlefield Banc Corp. ("Company") include its bank subsidiar y, The Middlefield Banking Company (“MBC” or “Middlefield Bank”), and a nonbank asset resolution subsidiary EMORECO, Inc. All significant inter-company items have been eliminated. On January 12, 2017, the Company completed its acquisition of Liberty Bank, N.A. (“Liberty”), pursuant to a previously announced definitive merger agreement. Under the terms of the merger agreement, Liberty shareholders received $37.96 in cash or 1.1934 shares of the Company’s common stock in exchange for each share of Liberty common stock they owned immediately prior to the merger. The Company issued 544,610 shares of its common stock in the merger and the aggregate merger consideration was approximately $42.2 million. Upon closing, Liberty was merged into MBC, and its three full-service bank offices, in Twinsburg in northern Summit County and in Beachwood and Solon in eastern Cuyahoga County, became offices of MBC. The systems integration of Liberty into MBC was completed in February. The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles and the instructions for Form 10 -Q and Article 10 of Regulation S- X. In management ’s opinion, the financial statements include all adjustments, consisting of normal recurring adjustments, that the Company considers necessary to fairly state the Company’s financial position and the results of operations and cash flows. The consolidated balance sheet at December 31, 2016, has been derived from the audited financial statements at that date but does not include all of the necessary informational disclosures and footnotes as required by U.S. generally accepted accounting principles. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included with the Company’s Form 10 -K for the year ended December 31, 2016. The results of the Company’s operations for any interim period are not necessarily indicative for the results of the Company’s operations for any other interim period or for a full fiscal year. Recent Accounting Pronouncements – In May 2014, the FASB issued ASU No. 2014 - 09, Revenue from Contracts with Customers (Topic 606 ), which will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. Under ASU No. 2014 - 09, revenue should be recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the guidance, an entity should 1 ) identify the contract(s) with a customer, 2 ) identify the performance obligation in the contract, 3 ) determine the transaction price, 4 ) allocate the transaction price to the performance obligations in the contract, and 5 ) recognize revenue when the entity satisfies a performance obligation. For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, the FASB issued ASU No. 2015 - 14 delaying the effective date of ASU No. 2014 - 09. Public business entities, certain not -for profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014 - 09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Because this guidance does not apply to revenue associated with financial instruments, including loans or securities, the new guidance is not expected to have a material impact on the components of income most closely associated with financial instruments, including securities gains/losses and interest income. The Company is currently evaluating this guidance to determine the impact on components of noninterest income. Although management has not completed its evaluation of the impact of adoption of the ASU on noninterest income, management does not expect the amount or timing of the recognition of such revenue to be materially impacted and does not expect adoption to have a material impact on the Company’s consolidated financial position, results of operations or cash flows. In February 2016, the FASB issued ASU 2016 - 02, Leases (Topic 842 ) . The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently assessing the practical expedients it may elect at adoption, but does not anticipate the amendments will have a significant impact on the financial statements. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a 1 percent increase in assets and liabilities. The Company also anticipates additional disclosures to be provided at adoption. In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments , which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recoding of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016 - 13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We expect to recognize a one -time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one -time adjustment or the overall impact of the new guidance on the consolidated financial statements. In January 2017, the FASB issued ASU 2017 - 01, Business Combinations (Topic 805 ), Clarifying the Definition of a Business , which provides a more robust framework to use in determining when a set of assets and activities (collectively referred to as a “set”) is a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. Public business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The amendments in this Update should be applied prospectively on or after the effective date. This Update is not expected to have a significant impact on the Company’s financial statements. In January 2017, the FASB issued ASU 2017 - 04, Simplifying the Test for Goodwill Impairment . To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (“SEC”) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. All other entities, including not -for-profit entities that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. This Update is not expected to have a significant impact on the Company’s financial statements. In March 2017, the FASB issued ASU 2017 - 08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310 - 20 ) . The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is not expected to have a significant impact on the Company’s financial statements. In May 2017, the FASB issued ASU 2017 - 09, Compensation – Stock Compensation (Topic 718 ) , which affects any entity that changes the terms or conditions of a share-based payment award. This Update amends the definition of modification by qualifying that modification accounting does not apply to changes to outstanding share-based payment awards that do not affect the total fair value, vesting requirements, or equity/liability classification of the awards. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for ( 1 ) public business entities for reporting periods for which financial statements have not yet been issued and ( 2 ) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the impact the adoption of the standard will have on its financial position or results of operations.

NOTE

- BASIS OF PRESENTATION

The consolidated financial statements of Middlefield Banc Corp. ("Company") include its bank subsidiar

y, The Middlefield Banking Company (“MBC” or “Middlefield Bank”), and a nonbank asset resolution subsidiary EMORECO, Inc. All significant inter-company items have been eliminated.

January 12, 2017,

the Company completed its acquisition of Liberty Bank, N.A. (“Liberty”), pursuant to a previously announced definitive merger agreement. Under the terms of the merger agreement, Liberty shareholders received

$37.96

in cash or

1.1934

shares of

the Company’s common stock in exchange for each share of Liberty common stock they owned immediately prior to the merger. The Company issued

544,610

shares of its common stock in the merger and the aggregate merger consideration was approximately

$42.2

million. Upon closing, Liberty was merged into MBC, and its

three

full-service bank offices, in Twinsburg in northern Summit County and in Beachwood and Solon in eastern Cuyahoga County, became offices of MBC. The systems integration of Liberty into MBC was completed in

February.

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles and the instructions for Form

-Q and Article

of Regulation S-

In management

’s opinion, the financial statements include all adjustments, consisting of normal recurring adjustments, that the Company considers necessary to fairly state the Company’s financial position and the results of operations and cash flows. The consolidated balance sheet at

December 31, 2016,

has been derived from the audited financial statements at that date but does

not

include all of the necessary informational disclosures and footnotes as required by U.S. generally accepted accounting principles. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included with the Company’s Form

-K for the year ended

December 31, 2016.

The results of the Company’s operations for any interim period are

not

necessarily indicative for the results of the Company’s operations for any other interim period or for a full fiscal year.

Recent Accounting Pronouncements

–

May 2014,

the FASB issued ASU

No.

2014

09,

Revenue from Contracts with Customers (Topic

606

which will supersede the revenue recognition requirements in Topic

605,

Revenue Recognition,

and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. Under ASU

No.

2014

09,

revenue should be recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the guidance, an entity should

) identify the contract(s) with a customer,

) identify the performance obligation in the contract,

) determine the transaction price,

) allocate the transaction price to the performance obligations in the contract, and

) recognize revenue when the entity satisfies a performance obligation. For public entities, the amendments in this update are effective for annual reporting periods beginning after

December 15, 2016,

including interim periods within that reporting period. In

August 2015,

the FASB issued ASU

No.

2015

delaying the effective date of ASU

No.

2014

09.

Public business entities, certain

not

-for profit entities, and certain employee benefit plans should apply the guidance in ASU

No.

2014

to annual reporting periods beginning after

December 15, 2017,

including interim reporting periods within that reporting period. Because this guidance does

not

apply to revenue associated with financial instruments, including loans or securities, the new guidance is

not

expected to have a material impact on the components of income most closely associated with financial instruments, including securities gains/losses and interest income. The Company is currently evaluating this guidance to determine the impact on components of noninterest income. Although management has

not

completed its evaluation of the impact of adoption of the ASU on noninterest income, management does

not

expect the amount or timing of the recognition of such revenue to be materially impacted and does

not

expect adoption to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

February 2016,

the FASB issued ASU

2016

02,

Leases (Topic

842

)

. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as

one

in which (a) the lease term is

months or less and (b) there is

not

an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees

may

elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after

December 15, 2018,

and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after

December 15, 2019,

and for interim periods within fiscal years beginning after

December 15, 2020.

The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently assessing the practical expedients it

may

elect at adoption, but does

not

anticipate the amendments will have a significant impact on the financial statements. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a

percent increase in assets and liabilities. The Company also anticipates additional disclosures to be provided at adoption.

June 2016,

the FASB issued ASU

2016

13,

Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments

, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recoding of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU

2016

is effective for annual and interim periods beginning after

December 15, 2019,

and early adoption is permitted for annual and interim periods beginning after

December 15, 2018.

With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the

first

reporting period in which the guidance is adopted. We expect to recognize a

one

-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the

first

reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such

one

-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

January 2017,

the FASB issued ASU

2017

01,

Business Combinations (Topic

805

), Clarifying the Definition of a Business

, which provides a more robust framework to use in determining when a set of assets and activities (collectively referred to as a “set”) is a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is

not

a business. This screen reduces the number of transactions that need to be further evaluated. Public business entities should apply the amendments in this Update to annual periods beginning after

December 15, 2017,

including interim periods within those periods. All other entities should apply the amendments to annual periods beginning after

December 15, 2018,

and interim periods within annual periods beginning after

December 15, 2019.

The amendments in this Update should be applied prospectively on or after the effective date. This Update is

not

expected to have a significant impact on the Company’s financial statements.

January 2017,

the FASB issued ASU

2017

04,

Simplifying the Test for Goodwill Impairment

. To simplify the subsequent measurement of goodwill, the FASB eliminated Step

from the goodwill impairment test. In computing the implied fair value of goodwill under Step

an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (“SEC”) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.

A public business entity that is

not

an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2020.

All other entities, including

not

-for-profit entities that are adopting the amendments in this Update should do so for their annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2021.

This Update is

not

expected to have a significant impact on the Company’s financial statements.

March 2017,

the FASB issued ASU

2017

08,

Receivables – Nonrefundable Fees and Other Costs (Subtopic

310

)

. The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do

not

require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018.

For all other entities, the amendments are effective for fiscal years beginning after

December 15, 2019,

and interim periods within fiscal years beginning after

December 15, 2020.

Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. This Update is

not

expected to have a significant impact on the Company’s financial statements.

May 2017,

the FASB issued ASU

2017

09,

Compensation – Stock Compensation (Topic

718

)

, which affects any entity that changes the terms or conditions of a share-based payment award. This Update amends the definition of modification by qualifying that modification accounting does

not

apply to changes to outstanding share-based payment awards that do

not

affect the total fair value, vesting requirements, or equity/liability classification of the awards. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

Early adoption is permitted, including adoption in any interim period, for (

) public business entities for reporting periods for which financial statements have

not

yet been issued and (

) all other entities for reporting periods for which financial statements have

not

yet been made available for issuance. The amendments in this Update should be applied prospectively to an award modified on or after the adoption date. The Company is currently evaluating the impact the adoption of the standard will have on its financial position or results of operations.